The Oregon Senate is considering new laws (SB 313, SB 314) and three other bills have been introduced (SB 510, HB 2248, HB 2257) that would expand the lawsuits trial lawyers can file against insurance companies and will create another layer of regulations. As a result, Oregon consumers and business owners could face $200 million or more in higher insurance costs, based on recent experience in other nearby states.
Many believe these new laws are unnecessary because the 2013 Oregon Legislature enacted SB 414, which expanded the authority of the Oregon Insurance Commissioner. The commissioner is authorized to not only regulate the industry but also to fine insurers who are found to have acted in violation of insurance law in claims handling and to order restitution payments to policyholders and claimants.
“It’s important to remember that the money to pay claims and settle lawsuits – both legitimate and frivolous – comes from each one of us who buy insurance,” said Karl Newman, NWIC president. “Insurance companies receive money from policyholders and use it to pay legitimate claims as they happen, defend against lawsuits and fight fraud. When those costs go up, rates go up. It’s unavoidable.”
In fact, during the first two years of Washington State’s first-party bad faith law, homeowners insurance loss costs rose 21.9 percent compared to other states, resulting in $190 million in additional losses for Washington residents.
One major difference from Washington’s law is that Oregon’s proposed new law would allow another driver to sue your insurance company for denying a claim when your company’s claims experts have investigated and found that you are not-at-fault. This difference will result in even more costs and higher rates.
“Oregon’s people have been hard hit by the recent financial crisis,” said Jim Perucca, Independent Agents & Brokers of Oregon executive vice president. “Now is not the time to enact laws that will increase costs, encourage expensive lawsuits and create more opportunities for fraud.”
An earlier study by the West Virginia Insurance Commissioner also found that states allowing other drivers to sue your company for bad faith have 25 percent higher claim costs than states that don’t allow that. The study led the West Virginia Legislature to eliminate third-party bad faith lawsuits in 2005, resulting in a $200 million savings in loss costs over five years.
“Oregon already has strong unfair claims handling laws and regulations,” said Clark Sitzes, Professional Insurance Agents of Oregon executive vice president. “Given tough economic times, now is not the time to add new laws that are proven to increase costs for consumers and businesses.”
California also had laws like these between 1979 and 1988. During that decade, lawsuits nearly doubled and insurance premiums rose more than 30 percent. When those laws were repealed the number of lawsuits, claim costs and premiums all returned to average levels.
